Is College a Gamble?

I read a Fast Co. article by Gregory Ferenstein last week, “What College Degrees Are Really Worth,” which shared information on median earnings by major group. (Displayed in the image below.) As someone who is working on a second masters, in a down and highly uncertain economy, the article got the wheels turning and eventually led to this post.

Education Costs

The following chart from the College Board shows the inflation-adjusted changes in tuition in fees for public and private 4-year schools, and public 2-year schools. On average, the price has roughly tripled over the past thirty years.

Unemployment

It may depend on timing. The following graph charts unemployment data over the past thirty years. Pay close attention to the most recent years. The data itself isn’t surprising, but I still found this alarming.

Downward Wages

The next chart shows wage growth (or lack thereof) over the past fifty years. I’m not familiar with the source, but it seems to pass the reasonableness test. If the data is correct, we have entered an extended phase of negative wage growth.

In pure economic terms, this means that the graduates of thirty years ago paid 1/3 of the cost when compared with today’s graduates and subsequently received thirty years of wage gains. Today’s grads are saddled with much more debt at a time when average wage growth does not appear imminent. The following graph, from the Cleveland branch of the Federal Reserve, shows consumer sentiment aligns with this assertion.

Rising Healthcare Costs

Downward pressure on wages partly stems from the rising costs of healthcare as shown in the next graph. These costs are likely trending up even faster today as insurers have used the recent healthcare reform measures as an opportunity to renegotiate contracts with employers.

Opportunities

This last graphic shows the breakdown of occupations of the top .1% and 1%. If you’re fortunate enough to land an opportunity at this level, you should be able to pay down your student loans. Outside of these ranks, the outcome is less certain.

A Growing problem

Andrew Jenks created the following video to draw attention to the growing problem of college debt in America. The debt burden placed on many of these students is well in excess of $100,000.

Parting Thoughts

The current climate of high unemployment, downward wage pressure, inflation and record corporate profits cannot be maintained for long. These circumstances will slowly nudge the public towards bankruptcy and debt slavery. Conditions will eventually improve, or we will collectively demand a change to the status quo which will create more favorable opportunities for the masses.

Taking on debt to finance an education may seem risky, but opting out seems even less appealing. I’d suggest doing your homework going in, so that you have an idea of what you are getting yourself into. If nothing else, you may find comfort in knowing that your circumstances will likely be better that those of us who graduated in December of 2008, as Wall Street’s collapse threatened to implode the global economy. At worst, you’ll at least have a more realistic expectation of the situation you’ll face. Whatever you do, I advise doing everything you can to increase your education and skill set as the modern economy is proving largely unfavorable to those who do not.

Update:

Hilary Spencer shared a recent NYT article earlier this evening:

@costrike@lucymarcus On the costs of edu (http://bit.ly/jiomgf) And 60% of new grads considering more school & debt: http://nyti.ms/kEk6c6

Steve’s post references an open letter on Facebook which makes the following claim:

Thirty years ago UC received 9% of the state budget and prisons 3%. Now UC gets 3% and the prison-industrial complex gets 9%. The legislature is taking the money that should be used to educate the best of its citizens and using it enrich the people who make a profit from the imprisoning the poorest.

I’ve no source on these figures, so you’ll have to judge their validity for yourself. If it is accurate, the prognosis is not good.

If you found this interesting, I welcome you to check out my books. I'm currently finishing up the last part of the book on Brexit that I'm serializing. Parts (1) covering the challenges in the EU prior to the referendum, & 2) which dives into the primary factors that drove the referendum's result, are already out. Part 3, which covers the events and circumstances following the EU referendum in June 2016, is scheduled for late 2018. The first book by the Wicked Problems Collaborative, an anthology titled, "What do we do about inequality?" is also available!